Half of manufacturers experienced data breaches in past year, report finds

Manufacturers face a barrage of cybersecurity threats today, and half of companies have fallen victim to at least one data breach during the past 12 months, according to the “2019 Manufacturing and Distribution Report” from Chicago-based professional services firm Sikich.

Of the 50 percent of respondents who said their companies experienced data breaches, 11 percent said they had “major” breaches. Still, executives believe their companies can thwart attacks. A majority (54 percent) said they are “extremely” or “very” confident in the ability of their companies to prevent or minimize the impact of data breaches.

The report found that many manufacturers—especially those with revenues under $500 million—neglect key cybersecurity preparedness efforts. Overall, less than 40 percent of these smaller companies perform cyber audits (38 percent), penetration testing (33 percent), security assessments of vendors (32 percent), and phishing exercises on employees (31 percent).

Though a majority of respondents have automated in some way production processes and machining, assembly, and packaging, only about a third said they have “extensively” automated these areas. Notably, even fewer manufacturers maximize their use of the most advanced technologies. For example, 24 percent use robotics extensively, while 23 percent say the same about 3D printing and additive manufacturing. Only 34 percent of companies use the industrial internet of things extensively, though that number rises to 57 percent for manufacturers with revenues of $500 million or greater.

Amid a decadelong economic expansion, manufacturers are bullish but still preparing for a downturn. Only 27 percent of the executives surveyed believe it is “extremely” or “very likely” that the U.S. economy will enter a recession in the next 12 months. However, that number rises to 49 percent among companies with $500 million or more in annual revenues. Overall, 63 percent of respondents are preparing for the possibility of a recession.

Despite the current economic boom, there are notable challenges on the horizon fueling concern of a downturn. Uncertainty surrounding global trade policy continues to hover over the industry. Nearly 40 percent of respondents expect trade developments to have a positive impact on their companies, while 35 percent said they expect a negative impact.

Manufacturers also are mixed on how the expansion of e-commerce has benefited or hurt their operations. Forty-nine percent of the companies surveyed said they use e-commerce to sell their products. Of these, 39 percent said sales from e-commerce have exceeded their expectations, while 37 percent said sales have been disappointing.

Further, labor challenges remain an impediment to growth. When asked to identify obstacles to innovation, 53 percent of respondents cited “finding and retaining the talent needed” as “extremely” or “very” challenging.

“Despite a long run of impressive economic growth, manufacturers face challenges related to rapid changes in the industry, geopolitical uncertainty, and the prospect of an eventual economic downturn,” said Jerry Murphy, partner-in-charge of Sikich’s manufacturing and distribution practice. “The manufacturers that thrive in the years ahead will be the ones that embrace advanced technology and proactively take steps to fortify their operations against cybersecurity, labor, and economic challenges.”